The Thai Rice Convention reveals global rice industry concerns: Indias monsoon woes and Thailands restructured

rice mortgage scheme dominate.

Story and photos by V. Subramanian

this would keep India out of the market in 2009 and possibly even in 2010, as domestic food security becomes the countrys top priority. The price outlook session featured Mr. Zwinger, Mr. Sridhar Krishnan (Olam International), Mr. Vandara Din (Ascot Commodities), Mr. Rafael Lopez Relimpio (Ebro Puleva), and Mr. Sriprasert. These panelists provided an amalgam of insights concerning the markets of Southeast Asia, the emerging exporters of Cambodia and Myanmar, the current self-sufficiency status of Indonesia, and demand from the ever-growing European Union, Middle East, and, most significantly, Africa. Their views suggested that markets were tightly balanced between supply and demand. Any weather anomaly may affect this tight balance and result in more market volatility. Mr. Zwinger showcased the japonica rice market as a good example of a tight demand and supply situation. Poor crop development in Australia, Egypt, and Japan has made the United States, particularly California (the rice bowl of japonica), the only stable source of japonica rice for exports to key consumers. The conference, in essence, revealed some very nervous exporters, traders, government officials, and buyers who seek stability in price, rice availability, and the economic environment. The speakers noted how the industry now sits on a razors edge, given the monsoon, El Nio, and other factors that could significantly affect supply. On the positive side, speakers also pointed to strong production in Thailand and Vietnam as factors that could offset the current production difficulties faced in India. Thailand and Vietnam are sitting on an estimated 7 million tons of stocks, which, together with Indias own buffer stock (at an estimated 20 million tons at the time of the convention), could provide hope for a balance between supply and demand.

Tight balance

he Thailand Rice Convention 2009 was the fourth in a series of conferences organized by the Thai government that began in 2001. Built on Thailands status as the worlds largest rice exporter (since 1979), the event gathered more than 500 rice specialists, producers, millers, exporters, buyers, and government officials to discuss all aspects of the global rice industry. Among the invited guest speakers were Samarendu Mohanty, head of the Social Sciences Division of the International Rice Research Institute, and Jeremy Zwinger, publisher of Rice Today. Two concerns that consistently came up during the presentations and discussions were the Thai rice mortgage system that is now being restructured (into a price guarantee scheme) and the delayed monsoon that has affected rice plantings in India. Price outlook, market volatility, and food supply sustainability thus became strong secondary themes on the back of these two events.

Monsoon Mortgage

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Price guarantee scheme

Experts invited to the event scrutinized Thailands recently approved price guarantee mechanism that will replace the rice mortgage scheme and also the role of politics in rice. Their analysis revealed how the rice mortgage system undermines Thailands competitiveness in the market. Robert Papanos of Seacor Commodity Trading LLC and Vichai Sriprasert of Riceland International Limited observed that, by creating a system in which guaranteed export
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availability came at a cost of US$350 per ton of paddy, the scheme has made Thailand the worlds most expensive exporter compared with other sizable rice-exporting nations. Mr. Papanos added that Thai exports were simply not made up of generic rice, but of several specialized products such as Hom Mali, parboiled rice, fragrant brokens, and Pathumthani rice. This has allowed Thailand to create a strong brand of rice in the world market, making the country renowned for its high rice quality and consistency. In the process, however, Thailand has struggled in the lower grade segments, where price competitiveness is an integral factor in procurement decisions. Thailand has constantly found itself competing with cheaper exports from Vietnam and Myanmar.

Delayed monsoon

Indias monsoon was another hot topic at the conference. According to Dr. Mohanty, at the time of the convention, not more than 19% of the plantings had been completed. The delayed monsoon caused near-drought conditions that destroyed crops. Because of this, India expected to see a lower-than-average production. The delegates agreed that
Rice Today October-December 2009